Sony’s online services allow people to play games, and for a
fee to access additional content, including games and movies; they can also
access other services such as Netflix on their Sony PlayStations consoles.Acessing the services required agreeing to
Sony’s Terms of Service and providing Sony with personal identifying information, including
names and credit card information.Hackers accessed millions of customers’ data in April 2011, which Sony
allegedly didn’t disclose for a while, though it took the network offline a few
days later and kept it down for almost a month while it audited the
system.During that time, plaintiffs
couldn’t use Sony’s online services, and many couldn’t access the third party
services either.Sony allegedly continued
to misrepresent the circumstances of the breach and didn’t inform the public
about the breach in one variant of its serices for roughly ten days.Then it made a public statement that user
personal information had been compromised, and encouraged those affected to
“remain vigilant, to review [their] account statements[,] and to monitor
[their] credit reports.”Sony allegedly admitted
that its failures “may have had a financial impact on our loyal customers. We
are currently reviewing options and will update you when the service is
restored.” Further, Sony conceded that some games couldn’t be played
offline.A week later, Sony took a
different service offline and announced that it too might have been
compromised.Sony ultimately announced
that it would provide US users with free identity theft protection services and
certain free downloads and online services.

The named plaintiffs suffered service interruptions and some
alleged that they bought credit monitoring services to protect themselves or
suffered unauthorized credit card charges.

There are 51 counts in this multidistrict complaint; they can be grouped as: (1) negligence; (2)
negligent misrepresentation; (3) breach of express warranty; (4) breach of
implied warranty; (5) unjust enrichment; (6) violation of state consumer
protection statutes; (7) violation of the California Database Breach Act; (8)
violation of the federal Fair Credit Reporting Act; and (9) partial
performance/breach of the covenant of good faith and fair dealing.

The court reaffirmed its holding that the plaintiffs had
Article III standing: the dissemination of their sensitive personal information
increased the risk of future harm. Clapper v. Amnesty International, 133 S.Ct.
1138 (2013), didn’t change that, although that case found that the plaintiffs
there hadn’t alleged sufficient injury to challenge FISA surveillance because
they hadn’t shown that targeting of their communications was “certainly
impending” (subsequent revelations might affect one’s evaluation of this
argument), and because the costly and burdensome measures they’d taken to
protect confidentiality couldn’t themselves establish standing.The court here found that Clapper didn’t impose a new requirement,
just rejected “a speculative chain of possibilities based on potential future
surveillance.” Here, there was an
alleged wrongful disclosure, which was enough for standing—plaintiffs alleged a
“credible threat” of impending harm.

The negligence claims lost for various reasons.For example, though plaintiffs alleged a
brief delaby between the intrusion and Sony’s consumer notification, they
failed to allege that their injuries—credit monitoring services, loss of use
and value of the services, and/or diminished value of their game consoles—were
proximately caused by the allegedly untimely delay.

The court found that commercial entities had a legal duty to
safeguard a consumer’s confidential information entrusted to them using
reasonable security measures, including industry-standard encryption, under California
and Massachusetts law. However, the
economic loss doctrine precluded recovery; plaintiffs didn’t allege a “special
relationship” with Sony beyond those envisioned in everyday consumer
transactions, so they couldn’t avoid the economic loss doctrine.

As for negligent misrepresentation/innocent misrepresentation/negligent
omission claims, they went down for various reasons (e.g., negligent
misrepresentation is not available in Ohio for non-business-based claims),
primarily because the misrepresentation claims were based on statements in user
agreements/the privacy policy, which were presented to plaintiffs after they bought their consoles.Thus, they couldn’t plausibly allege
pecuniary loss as a result.

The user agreements required California law for the breach
of warranty claims, which kicked out more causes of action based on the laws of
various states; implied warranty claims also failed because of the existence of
an express agreement disclaiming implied warranties, and because network
services aren’t “goods” under the UCC.The existence of a valid contract also doomed various unjust enrichment
claims.

As for the consumer protection claims: Begin with
California, and of course with standing, which requires injury in fact/economic
injury caused by the unfair business practice or false advertising that is the
gravamen of the claim.The court found
that plaintiffs adequately alleged harm stemming from Sony’s omissions at the
point of purchase.Though the network
was free/plaintiffs registered after acquiring their consoles, plaintiffs
alleged that access to the network, and internet access via their consoles, was
a key feature of the consoles.They
further alleged that if Sony had disclosed that the network wasn’t reasonably
secure, or that it didn’t use industry-standard encryption to secure their personal
information, they wouldn’t have bought, or would have paid less for, the
consoles.Although plaintiffs couldn’t
have reasonably relied on the post-purchase-disclosed user agreement/privacy
policy, they could have relied on the alleged fraudulent omissions.

But did plaintiffs plead with particularity? While no
reasonable consumer would believe that Sony promised to provide continued and
uninterrupted access, plaintiffs suffficiently pled that Sony misrepresented
that it would take “reasonable steps” to secure their personal information, and
that Sony used industry-standard encryption “to prevent unauthorized access to
sensitive financial information.” Though Sony disclaimed perfect security,
deceptiveness was a question of fact given Sony’s representations about
industry-standard encryption.The
fraud-based omission claims were also sufficiently pled (relating to Sony’s
failure to tell consumers it didn’t have adequate safeguards in place, failure
to immediately notify consumers of the intrustion, and failure to disclose
material facts about the security of its network).Plaintiffs also sufficiently alleged a basis
for restitution—Sony benefited financially from the sale of consoles based on
fraudulent omissions.However, UCL/FAL
claims for injunctive relief failed for want of specificity.Sony argued that the CLRA didn’t apply to
registration for free network services, but omissions at the point of console
purchase were a different matter.

Florida (FDUTPA): Dismissed for want of actual damages,
which means a difference in market value of service delivered versus market
value in the condition in which it should have been delivered.The Florida plaintiffs didn’t allege that
they wouldn’t have bought their consoles but for Sony’s deceptive conduct, and they
failed to allege that a reasonable person would’ve behaved differently at the
point of purchase absent the challenged conduct; plaintiffs’ allegations were
about the post-purchase user agreement and privacy policy. Consequential
damages are unavailable in Florida, so what plaintiffs paid for third party
services disrupted by the security problems was unrecoverable.And disclosure of personal information wasn’t
actual damage, since personal data doesn’t have an apparent monetary value that
can be priced. However, the Florida claims for declaratory/injunctive relief
survived, despite the privacy policy’s disclaimer of perfect security. Again,
Sony allegedly warranted that it would take “reasonable” security measures and
use industry-standard encryption, but didn’t; this created a factual issue.

Michican’s Consumer Protection Act: essentially the same
result.(This opinion is a bear, but the
judge did not take any shortcuts; each state’s law is specifically considered,
even though the results are pretty much in tandem.)

Missouri Merchandising Practices Act: Claim survived, for
reasons similar to those offered for California.

New Hampshire Consumer Protection Act: Claim for statutory
damages survived, as the NHCPA “does not require a showing of actual damages
for the claimant to be awarded the statutory minimum and attorneys’ fees.” Literally
true but misleading claims are actionable, and the necessary “rascality” was
sufficiently alleged here; the New Hampshire Supreme Court has upheld a NHCPA
claim when a defendant “made representations [ ] knowing that he lacked
sufficient knowledge to substantiate them.” However, statutory damages were disallowed in
the absence of actual damages in the class action context. Plaintiffs failed to
allege actual damages resulting from Sony’s alleged material
misrepresentations, so the class action allegations were dismissed, but not
claims for injunctive relief.

New York Deceptive Practices Act: Dismissed for lack of
actual injury caused by Sony’s alleged material misrepresentations.Lost privacy/value of personal information
stemming from a data breach wasn’t enough, at least where the loss was
unintentional rather than intended by the defendant. See the Florida analysis for the court’s treatment
of the rest of the claimed harms, which also led to dismissal of the Texas
claims. Comment: despite differences in courts’ wording of the test, these
states and many others have basically the same rules. This suggests that courts
should be more willing to entertain multistate class actions, with some
grouping when necessary.

Ohio consumer protection statutes: Because the “vast
majority of federal courts and all lower state courts to address the issue have
concluded that relief under the [Ohio Deceptive Trade Practices Act] is not
available to consumers,” the court found that plaintiffs lacked standing.As for the Ohio Consumer Sales Practices Act,
consumer class actions require that the defendant’s alleged violation be “substantially
similar to an act or practice previously declared to be deceptive” by the Ohio
Attorney General or an Ohio state court, and plaintiffs couldn’t meet that
standard.

The damage claims under the California Database Breach Act
were dismissed (no damages caused by delay in notice) but not the injuctive
relief claims.Sony wasn’t a consumer
reporting agency and therefore couldn’t violate the Federal Fair Credit
Reporting Act.Finally, the court
allowed a claim for partial performance/breach of the covenant of good faith
and fair dealing to go forward, based on allegations that Sony didn’t perform
under a settlement agreement between the parties.

The first edition of this book in 2002 was the first UK text to examine digital copyright together with related areas such as performers' rights, moral rights, database rights and competition law as a subject in its own right. Updated editions have included the UK implementation of the 2001 Information Society Directive and commentary on user-generated content and the development of Web 2.0 and beyond. Now in its fourth edition, the book has been updated and revised to take account of legal and policy developments in copyright law and related areas, in particular the increasing role of the Court of Justice of the European Union in shaping EU copyright law.

The book helps put digital copyright law and policy into perspective and provides practical guidance for those creating or exploiting digital content or technology, whether in academia, the software, information, publishing and creative industries, and other areas of the economy. The focus is on the specifics of the law in this area together with practical aspects, including precedents and precedent checklists dealing with common digital copyright transactions. The latest edition has been expanded to include a discussion of Open Access, eBooks and app development and licensing. Both academics and practitioners will find the book an invaluable guide to this rapidly developing field of law.

The Author

Simon Stokesis a solicitor and a partner with Blake Lapthorn and a Visiting Research Fellow at Bournemouth Law School.

UK, EU, ROW:If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please quote the reference‘STOKES4’in the voucher code field and click ‘apply’.

US:If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please quote the reference‘STOKES4’in the special instructions field on the credit card screen.

Rebecca TushnetGeorgetown University Law Center“More than a Feeling: Emotion and the First Amendment” (As it turns out, my paper is in the "one of these things is not like the others" category, but I hope it builds on Sullivan as well.)

Defendant Pitsicalis, who licensed copyrights in some images
of Hendrix, was found liable for trademark infringement for some
Hendrix-related conduct.(The court also
upheld Washington’s right of publicity law that grants rights of publicity to
everyone, domiciliaries or not, within Washington’s borders—another reason the
Supreme Court should fix this metastasizing right, and quickly.)On appeal, Pitsicalis challenged only the
determination that the domain names hendrixlicensing.comandhendrixartwork.com infringedExperienceHendrix’strademark“Hendrix.”He argued that his
use was nominative.The district court
foundthatPitsicalis used “Hendrix”in hisdomainnamestorefer,nottoExperienceHendrix’s products(asthe
court of appeals said wasrequiredforanominativefairusedefense),but onlytoPitsicalis’sownproductorservice,licensingand marketingHendrix-relatedgoods(whichisnotprotected underthenominativefairusedefense).“On appeal,Pitsicalis doesnotarguethathisdomainnamesrefertoExperience Hendrix’s
products.Nor does he contend that Jimi
Hendrix isExperienceHendrix’sproduct.”(CitingCairnsv.Franklin MintCo.,292F.3d1139(9thCir.2002).)Pitsicalis didn’t raise a
descriptive fair use defense (probably because it’s so messed up in the 9th
Circuit after the KP Permanent remand),
which would deal with a use of a mark to describe only the defendant’s own
goods.Affirmed.

But this is nonsense: raising the nominative fair use
defense inherently makes the point that Jimi Hendrix is both a
fact-in-the-world and a trademark, just like the New Kids, just like Princess
Diana.In neither of those cases did
defendants refer to the goods or services
the plaintiff was selling under the mark; they used the names at issue to
refer to the entities named, just
as here.Defendant’s service might have
been licensing Hendrix-related goods, but the reference to Hendrix contained in his domain names was nominative:
a reference to Jimi Hendrix the person, to whom the trademark also
pointed.This seems to be some weird
“use as a mark” concept, not fully spelled out and therefore left around like a
loaded gun to damage some other fair use.

Wednesday, January 29, 2014

Interesting post from Lewis Silkin about the UK's ASA versus the EU Court of Justice: the former allowed an advertiser to rely on a third party's representations (I think that's a bit of a simplification--the third party was the complainant who objected to a characterization taken from its own website! I don't know that the ASA would allow reliance on a totally unconnected third party) while the latter didn't allow an advertiser to rely on claims that it was the exclusive provider of certain booking services despite having contracts that purported to make it the exclusive provider, when it turned out that some of its partners had ignored the exclusivity provision. Due diligence, Lewis Silkin concludes, is likely to be insufficient if you're wrong.

This is the US result under the Lanham Act and most consumer protection statutes, too, though I would expect that concepts of standing would also play a big role here; it is extremely unlikely that a hotel would be able to challenge a hotel information site under the Lanham Act, though trade libel would be a possibility depending on the particular facts. (The post points out that materiality would be an issue in Europe, as it would be here too--the ASA evaluated whether the claim that a hotel provided complimentary toiletries was misleading, which is maybe not the most significant of claims.)

Swatch sued over Bloomberg’s 2011 posting of the recording
of a conference call at which Swatch executives discussed the company’s
recently released earnings report with invited investment analysts. “Swiss law permits public companies to hold
this kind of earnings call with a limited group of analysts, provided that the
company does not disclose non-public, significantly price-sensitive facts
during the call.”About 132 of 333
invited financial analysts joined the call, and a vendor recorded the entire
call, while an operator affiliated with the vendor welcomed the analysts to the
call and told them, “This call must not be recorded for publication or
broadcast.” The Swatch executives “provided
commentary about the company’s financial performance and answered questions
posed by fifteen of the analysts.”The
call lasted 132 minutes, and the executives spoke for 106 of them.

Bloomberg, though not invited, obtained a sound recording
and written transcript of the call and made them available online, without
alteration or editorial commentary, to subscribers to its online financial
research service, Bloomberg Professional. Bloomberg touts Bloomberg
Professional as “[a] massive data stream” with “rich content” that is
“unparalleled in scope and depth” and is “delivered to your desktop in real
time,” as well as “access to all the news, analytics, communications, charts,
liquidity, functionalities and execution services that you need to put
knowledge into action.”

Swatch sued for infringement, then applied for registration
for the sound recording of the earnings call; after discussion with the Copyright
Office, registration was granted only for statements made by Swatch executives,
not statements by the operator or questions from the analyst.Swatch’s infringement claim went only to the
sound recording, not the transcript, pursuant to 17 U.S.C. § 114(b), under
which only actual sounds fixed in the recording are protected by the sound
recording copyright; Swatch apparently conceded that the transcript was outside
its right to prepare derivative works (or to control reproductions).

The court of appeals upheld summary judgment for Bloomberg
on fair use grounds.Factor one favored
fair use because Bloomberg’s news reporting served an important public
interest.Swatch argued that Bloomberg
wasn’t engaged in news reporting, just conveying “data,” and that discovery was
needed on the issue (as well as others about Bloomberg’s state of mind and
whether Bloomberg’s subscribers actually listen to recordings or just read
transcripts).

“[W]hether one describes Bloomberg’s activities as ‘news
reporting,’ ‘data delivery,’ or any other turn of phrase, there can be no doubt
that Bloomberg’s purpose in obtaining and disseminating the recording at issue
was to make important financial information about Swatch Group available to
American investors and analysts.”This
information “is of critical importance to American securities markets.”The SEC mandates that, when American
companies disclose this kind of material nonpublic information, they have to
make it available to the public immediately. Though Swatch is exempt from the
SEC’s rule, that doesn’t change the public interest in this information, which remains
highly relevant to American markets.“At
a minimum, a use of copyrighted material that serves this public purpose is
very closely analogous to ‘news reporting,’ which is indicative of fair use.”This important public purpose overwhelmed the
weight otherwise given to “Bloomberg’s clandestine methods and the commercial,
nontransformative nature of its use.”(When
a work fits the §107 preamble, there’s a strong presumption that factor one
favors the defendant, but given the factual disputes, the court assumed that
Bloomberg’s use wasn’t within the “core notion” of “news reporting,” so it didn’t
apply the presumption.)

True, Bloomberg was a commercial enterprise, but so are many
fair users, and the link between the copying and commercial gain was attenuated—Bloomberg
Professional “is a multifaceted research service, of which disseminating sound
recordings of earnings calls is but one small part. Moreover, it would strain
credulity to suggest that providing access to Swatch Group’s earnings call more
than trivially affected the value of that service.”So commerciality had reduced weight here.

So did Bloomberg’s lack of good faith, which in general
contributes little to fair use analysis.Assuming, for summary judgment purposes, that Bloomberg was fully aware
of Swatch’s directive, its overriding purpose was not to “scoop[]” Swatch or
“supplant the copyright holder’s commercially valuable right of first publication,”
“but rather simply to deliver newsworthy financial information to American
investors and analysts. That kind of activity, whose protection lies at the core
of the First Amendment, would be crippled if the news media and similar
organizations were limited to authorized sources of information.”(Citing the Pentagon Papers case!)

Transformativeness is important, but not necessary; some
core examples of fair use, like multiple copies for classroom use, “involve no
transformation whatsoever.”(Yay!It’s nice to see “multiple copies for
classroom use,” which is in the statute, be recognized as core fair use, rather
than edited out, as has happened in other cases.)In the context of news reporting and similar
activities, “the need to convey information to the public accurately may in
some instances make it desirable and consonant with copyright law for a
defendant to faithfully reproduce an original work rather than transform it.”In those kinds of cases, courts often find
transformation in the altered purpose
or context of the work, as shown by
surrounding commentary or criticism.But
additional commentary or analysis was absent here.Still, by disseminating the call, “Bloomberg
was able to convey with precision not only what Swatch Group’s executives said,
but also how they said it. This latter type of information may be just as
valuable to investors and analysts as the former, since a speaker’s demeanor,
tone, and cadence can often elucidate his or her true beliefs far beyond what a
stale transcript or summary can show.”Courts have often noted that a “cold transcript” isn’t as good as a more
physical presentation.Also, it doesn’t
matter how many Bloomberg subscribers took advantage of this extra information;
it remains independently valuable.

News reporting can’t excuse all copying.“But here, in light of the independent
informational value inherent in a faithful recording of the earnings call, the
fact that Bloomberg did not transform Swatch’s work through additional commentary
or analysis does not preclude a finding that the ‘purpose and character’ of
Bloomberg’s use favors fair use.”Other
news cases finding no fair use were not to the contrary.Translating from one language to another;
reporting the conclusions from research reports; and copying information
compiled by a competing financial publisher were all different.In those cases, the defendants “appropriated
works in which the copyright owner had transformed raw financial information by
compiling it from multiple sources or by mixing it with their own commentary
and analysis.”Here, though, the sound
recording—including the executives’ modes of expression—“were themselves pieces
of financial information.”The other
cases were about secondary sources; this case is about a primary source, and
that makes a difference.(This is
sounding a lot like Barclays
Capital v. Theflyonthewall.com, 650 F.3d 876 (2d Cir.2011).)Swatch’s desired discovery couldn’t change
any of this.

Nature of the work: there’s a thin copyright, because the
conference call was “manifestly factual,” even with quirks of expression by the
executives.“[W]hile we assume without
deciding in this appeal that the call contained sufficient original
expression—in the form of the executives’ tone, cadence, accents, and
particular choice of words—to be copyrightable, the purpose of the call was not
in any sense to showcase those forms of expression. Rather, the call’s sole
purpose was to convey financial information about the company to investors and
analysts.”This placed it “at the very
edge” of copyright’s protections.

Also, the work was published before Bloomberg’s use.Publication, for fair use purposes, is not “publication”
as specifically defined by the Copyright Act in §101; statutory publication didn’t
occur here.That technical definition
serves many channeling purposes (e.g., triggering the deposit requirement), but
it doesn’t serve the purposes of fair use.The common-law nature of fair use justifies a different, more functional
understanding of publication.The court
would not “blind [itself] to the fact that Swatch Group invited over three
hundred investment analysts from around the globe to the earnings call, out of
which over a hundred actually attended.”Swatch wasn’t deprived of the ability to control the first public
appearance of its expression. Courts “commonly look past the statutory
definition when considering this issue,” and even in Harper & Row the Supreme Court suggested that “even substantial
quotations might qualify as fair use in a review of a published work or a news
account of a speech that had been delivered to the public or disseminated to
the press.”

Amount used: this factor can’t favor Bloomberg, but it is
neutral.Given the public interest in
the information, copying the whole call was reasonable in light of Bloomberg’s
purpose, regardles of how many Bloomberg subscribers took advantage of the
value added by the recording over the transcript.

Market effect: None.The relevant effect is that caused by Bloomberg’s use of the expressive elements of the work, and
there was no evidence of any possible market effect.Swatch didn’t presently seek to profit from
publication of earnings calls.What
about a potential market?“While the
loss of a potential yet untapped market can be cognizable under the fourth fair
use factor, the potential market here is defined so narrowly that it begins to
partake of circular reasoning…. The hypothesized market for audio recordings of
earnings calls convened by foreign companies that are exempt from [SEC
publication requirements]” was not traditional, reasonable, or likely to be
developed.

And, even if a financial news or research organization might
be willing to pay for access, copyright’s ultimate aim is to stimulate
creativity for the general good.“Here,
the possibility of receiving licensing royalties played no role in stimulating
the creation of the earnings call.” Swatch actually argued that it didn’t even know
whether there was a potential market for this kind of recording.The call’s purpose was to let Swatch
executives disseminate information about the company in a way they believed
would be favorable—that’s the incentive for earnings calls, not copyright.“By making the recording available to
analysts who did not or could not participate in the call initially, Bloomberg
simply widened the audience of the call, which is consistent with Swatch
Group’s initial purpose.” Swatch’s
interest in “know[ing] and control[ling] precisely who heard the call” wasn’t weighty
enough compared to the public interest in the dissemination of important
financial information. (And here is the Barclays
cite.)

Balancing the factors led to a fair use finding.

The court denied Bloomberg’s cross-appeal on the
copyrightability of the sound recording as not properly before it; Bloomberg
wasn’t aggrieved by the ruling, given its victory on other grounds, and it didn’t
jump through the right procedural hoops for a separate appeal.

Hearing on Fair Use, House Judiciary Committee Subcommittee
on Internet/IP

Rep. Coble (subcommittee chair): Fair use is important.North Carolina universities rely on copyright
law and on fair use.Fair use’s strength
is its ambiguity/freedom for courts, but also its greatest weakness in the
digital era.Congress could provide
guidance on what it did/didn’t intend to be fair use.

Rep. Conyers: Fair use is generally working as intended—a
limited exception to creator’s property rights when certain public interests
conflict with those rights.Current law
attempts delicate balance between public interest and creator’s ability to earn
a living. Creators should be able to tell new stories by using copyrighted material
as historical artifacts, depict real world scenes and events. Historians,
biographers, filmmakers use these work for meaning and insights about
historical events.Essential to discuss
historical events, critical to news organizations/public broadcasters. Current
law, while not perfect, provides reliable guidance to copyright owners. We must
continue to monitor this area, vigilant in safeguarding rights of creators.
Calls for expansion of fair use: due partly to the fact that specific statutory
limitations haven’t kept pace with emerging technologies? Content owners should
continue to develop best practices.Interest in maintaining fair use’s historical role as flexible doctrine
should continue in broad range of context; we should reexamine application of
transformative use, which has become all things to all people.Fair use impacts all industries, including
education and journalism; should develop best practices.

Rep. Goodlatte (committee chair): Fair use was codified only
in 1976 but part of copyright law before that; changed a bit in 1992 for
unpublished works but unchanged otherwise.Flexibility has encouraged new business models.Certainty is also beneficial, both for
copyright owners and users. Not every dispute should require judicial
interpretation—wants to know how statute has succeeded—too specific? Not
specific enough? Are the factors appropriate and appropriately defined? Key
question: How does one define what is transformative.Several witnesses note that
transformativeness is viewed by judges as of primary importance.

Peter Jaszi: Fair use helps guarantee the continued
international primacy of the US as a site of innovation. After a rocky start,
courts are now doing an excellent job.Could use legislative support—exempt noncommercial derivative work from
onerous statutory damages; amend §301 on preemption to bar some or all
contractual waivers of the fair use right.Written testimony describes current unified field theory of fair use
that informs decisions—keyed to the notion that uses that advance
transformative ends, repurposing and adding value to copyrighted material, are
favored.2d Circuit yesterday provided
example: Bloomberg posted a transcript of Swatch conference call.In context of news reporting, conveying info
to the public accurately allows faithful reproduction of original work.Transformation comes from altered purpose or
context, even when the entire work is being used, in light of purpose.Bloomberg served public interest in access to
info without great harm to competing private interest.

SCt has stressed the intimate connection between fair use
and the First Amendment. Past 20 years, we’ve seen fair use as an important
positive right by many—teachers, artists, scholars, librarians, providers of
disability services, etc.—contributing to progress. Not everyone likes every
fair use decision, but we all benefit from general pro-innovation trend.Pattern of decisions articulate no a priori
limits on the range of situations to which the doctrine is applicable, and
given copyright’s goal—which isn’t to favor any particular form, but to promote
the dissemination of knowledge—there’s no reason such limits would be
desirable. Those who would limit it have a heavy burden of persuasion.
Flexibility and dynamism allow adaptation to new social and technological
situations.Sec. 108, 110, 121 are also
good for particular user groups as safe harbors, but never comprehensive and
often not up to date. These provisions don’t supplant fair use but are
supplemented by it.

One common critique is flexibility = uncertainty. Recent
scholarship shows patterns and predictability.Lawyers can forecast likely outcomes where there are analogous
precedents.Contributing to
predictability is fair use best practices.Greatest credit for healthy fair use belongs to users, large and small,
who invest thought and time in making fair use decisions, furthering the
constitutional objective of copyright in expressive flourishing.AU has been involved in developing fair use
best practices across a wide range of different professions, from documentary
filmmakers to College Art Association.

June Besek: In early 2008, Columbia sponsored a symposium:
Fair use: incredibly shrinking or expanding? Answer: expanding. Until recently
copying a whole work couldn’t be fair use.Now copying millions of works can be fair use.Fair use is essential, but not carte blanche
for unlimited use of others’ work even for social benefit.Principal reason for expansion has been
significance of transformative use.Campbell v. Acuff-Rose: commercial use
wasn’t dispositive; using a work in a way that adds something new, with new
expression, meaning or message.Other
cases involved productive uses—to annotate, analyze, parody. Post-Campbell cases expanded to how the work
was used—functional transformation. They began to apply transformative label to
new uses without creating new works—uprooted from original context, enabling
new business models rather than new works of authorship. Troubling consequence
is that if court finds transformativeness because it reaches new markets, can
usurp author’s derivative work rights in potential new markets.Tends to find that the use doesn’t compete
with the author’s market.Authors’
rights depend on race to market.

Fair use has sometimes strayed too far in one direction or
another—commerciality dispositive; Campbell
stepped in. But the pendulum has gone too far; transformativeness has become
too important.But fair use remains a
rule whose application is best made by judges. Legislative intervention may be
appropriate when judges go too far. Current swing reflects concern for mass
digitization; Congress could address that, which is skewing the law/could
reduce pressure that risks turning fair use into a protection for new business
models instead of authors.

Naomi Novik: Creator and artist whose work is deeply
affected by fair use.Published author
of 10 novels, including NYT bestselling novels, optioned by Peter Jackson.
Worked on computer games, graphic novels, open and proprietary software. Would
have done none of it without fan fiction. Discovered fan community: wrote fan
fiction, software, made remix videos. Found enthusiastic community. We weren’t
trying to make money; gathering around a campfire and singing songs/telling
stories.Bigger because of the internet;
not Robin Hood but Captain Picard—fair use gave us the right. We felt fair: we
watched Star Trek religiously, we
bought the DVDs and T-shirts. We had our own new ideas about the characters,
universe—we are imaginative creatures—and we wanted to share. I learned to
explore ideas in the remix community. Eventually that led to my own characters
and universe.Now other people get ideas
from Temeraire.I hope that fans will go on to write their
own bestsellers/games, perhaps with an idea from me. We all build on the ideas
of those who come before us. There’s no hard line—original work is at the end
of a spectrum of transformation, and fair use protects the spectrum. It allows
us to share and learn by doing.

Licensing isn’t a practical alternative. We don’t have the
time, money, access, or knowledge. I wrote my first story as a college student
working a part time job; if I’d had a complicated process I might never have
done it.Imagine if kids who played Lone
Ranger in the back yard needed a license before doing that—today the internet
is the back yard.

Copyright owners: most of us aren’t large with
media/licensing departments. I don’t want the difficulty/expense of licensing
everyone who wants to use my works.Licensing also invariably stifles transformative works—tie-ins always have
stringent requirements. The point of licensing is almost always to avoid
transformation, avoid leaving copyright owner’s vision.

Ask Congress to help developing artists to exercise fair use
rights.Most people don’t have resources
to defend themselves.Incubators could
be supported by make it less frightening: good faith should limit damages;
limited automated screening tools and allow claim fair use; exemption for
noncommercial transformative works like libraries and teachers have.Don’t narrow fair use; protect innovators.Innovation starts with asking “what if?”What if you crossed a computer with a music
player? Makes US strong.

David Lowery: Mathematician, lawyer, musician, etc. Rise of
internet has led to attention to fair use as excuse for trumping rights of
authors.Technology companies,
commentators, lobbyists, and some artists. Not concerned with parody,
commentary, criticism, documentaries—but concerned with copy that masquerades
as fair use.These interpretations of
fair use that pass off versions of my work indistinguishable from my work as
fair use—licensing is better.Remix/sampling: there has been a push for expanded fair use; defies
logic because there’s no urgency. Robust market-based mechanisms for licensing
exist; hip hop is most popular on planet without fair use.Don’t fix it if it isn’t broke.

Song lyrics: sites that reprint song lyrics with
annotations/meanings are not fair use. Has experienced unauthorized use of
lyrics on RapGenius.Researched lyrics
sites and identified undesirable ones.After he ID’d RapGenius as #1, one principal began annotating his song
“Low,” but the annotations were just popup links—not different from other
lyrics sites; competes with licensed sites.Reprinting entire book with occasional links to defined words would be
the same. RapGenius took a license.What’s so hard about asking permission? I only expect to be treated as I
treat other artists.Doing unto others =
foundation of civilization. Rightsholders can be easily identified—look up song
owners on public database.Review
practical history to see fair use is working as intended. No
expansion/intervention is needed at this time.

Kurt Wimmer: Newspapers
start important conversations, often continuing online on platforms we own and
elsewhere. Scope of fair use is important to the industry. Spend $5
billion/year gathering info; investing in mobile platforms; larger audiences
than ever more; circulation revenue grew 5% in 2012, and online circulation
revenue grew 275%.But much ground to
make up because of disruption of digital—print advertising collapsed and
digital didn’t make up; competition is fierce online.Need to compete with other creative companies
but also companies that build themselves on our backs—Google News, etc. These
can result in some limited traffic to newspaper sites, but not meaningful
revenue. Those companies monetize their readership. Some of these uses are
fair, others clearly not. This is an issue that can be remedied by courts, not
Congress. Fair use currently strikes the right balance, allowing courts to
respond to changes in technology.

Recent example: SDNY’s AP v. Meltwater case. Meltwater
scraped AP articles and delivered excerpts to paying subscribers. Court found
this was a substitute for original articles, judging by clickthrough rates.
Without additional commentary, this wasn’t fair use. Focus on commercial
ventures that take/resell our content may be necessary. Not all fair use
decisions are right, such as undue weight for transformativeness in some recent
decisions; shouldn’t subsume other factors, but we hope/expect this imbalance
will change over time. Also, licensing is fixing the problem. Many
participants—including innovative startups—would prefer licensing over
questionable business models. Licensing allows distribution on new platforms
and support journalism.Our goal is
consistent with our longstanding mission: appropriate balance of enforcement,
licensing, and our own platforms, including relying on fair use.

Conyers: what is transformative and what isn’t?

Wimmer: very fact-based.Allowed secondary uses in straightforward manner shouldn’t be fair
use—Grateful Dead case, in which publisher just put Grateful Dead posters in
chronological order—court found that transformative, which he thinks is wrong.(RT: This is a misdescription of what the
publisher did.)Bloomberg case, though,
is right.

Lowery: reprinting of my lyrics on a site without licensing
isn’t transformative even if it’s annotated with popup explanations.There are market based mechanisms, agencies
that license lyrics.

Conyers: should we codify a definition of transformative?

Jaszi: don’t arrest judicial development that is well
underway. We’ve resisted codification of fair use over time, and the results
have been enormously productive for social and technological innovation. Narrow
transformativeness would be a grave error.

Conyers: are there recent fair use decisions with which you
disagree and why?

Besek: A number, but one is use within a law firm of
scientific articles. The argument for transformation was that the law firm
needed to submit the articles to the PTO as evidence of prior art.But the articles are published to understand
new scientific developments; the law firm is reading the articles for
substance. That’s not transformative, though it may be excused on other
grounds.

Novik: I’m not a lawyer, but transformativeness is “you know
it when you see it”—the Grateful Dead case, the book presented the posters in
thumbnail form in a way that, for me as a reader, I found new information and
no replacement of the original (a big poster on the wall)—showed the evolution
of the style of the Grateful Dead.So
far, I feel courts have generally been making interpretations that, for me as a
creator, make sense.

Rep. Chu: Creators simply want to make a living from their
works, but face barriers.For Lowery: Remixes/illegal
lyrics—what’s the right way to sample music?Permission, Lowery says, is possible—why do some choose not to do it the
right way when markets exist?Lowery
conducted a study on lyrics infringement—how serious and prevalent is this
problem?

Lowery: Lyrics are an interesting case, because there was no
market before the digital age; it’s a success story for the internet—relatively
obscure artists can get some small revenue from lyrics.Generally, lyric websites do license.About ½, slight majority of traffic is to
licensed sites.Backsliding and a push
for fair use based around annotations/meanings.Directly competitive with the market with established price, uses.On hip-hop, he often hears there’s been some
sort of decrease in innovation.The
market disagrees; hip-hop is now more popular than it ever was, so restricting
uses didn’t affect popularity.People
tend to do what copyright intended when they can’t obtain a license for a
song—they create a new loop to take the place of the sample, as the Founding
Fathers intended.

Chu for Besek: Some people are pushing to export our common
law of fair use. What are the potential consequences?

Besek: this is an interesting idea, but it’s not the time to
do it, because we have enough uncertainty here that we shouldn’t be sending it
to other countries.(Good enough for us,
not for you!)We have so many cases in
the US where fair use has switched from district court to court of appeals;
can’t assume other countries would apply it like we do.Other countries don’t have blanket
exceptions, but specific ones; for us to impose fair use wouldn’t sit very
well.(Unlike all the other requirements
we impose ….)

Rep. Marino for Jaszi: where do you draw the line on fair
use? Lyrics, poetry?

Jaszi: the line is properly though not easily drawn between
uses that are genuine value-added uses which do infuse commentary and critique.

Marino: so everything is fair game?

Jaszi: I don’t think so.There may be sites in which the added value or repurposing is pretextual
rather than real.

Marino: hear constantly from musicians and artists who are
waiting tables in restaurants and see their music on the internet and receive
nothing for that—do you have a problem with that? Their music makes a lot of
money, but pirates use it.

Jaszi: I don’t believe anyone defends piracy as fair use. It
lacks transformativeness, repurposing, addition of value, which the courts have
identified over the last 20 years.

Marino: so you don’t have a problem with the courts making a
determination about these sites?

Jaszi: that’s how we should proceed.

Marino: what would your position be if your employer
videotapes your lecture and then fires you so it can rerun your lectures
instead.

Jaszi: they do that already, and somehow I’ve survived. This
is a contractual issue.

Marino: but many people in the entertainment industry aren’t
surviving.(I don’t see how this is fair
use’s fault, but rather a contractual problem.)

Jaszi: the problem here is not a copyright problem.My contract defends me in my workplace. The
essential problem relating from the return from the market is a problem of
contract.

Marino: why not TM? Why not patent?

Jaszi: we do have a vital doctrine of fair use in TM. Patent
law is far shorter, but also subject to a number of public interest exceptions.

Marino: patent is far more stringent.

Rep. Lofgren: put into record fair use principles for
user-generated content.

Marino: is there consistency in courts’ opinions?

Wimmer: there was until the late 1990s, when transformative
use ascended. Now transformative use has unsettled the marketplace. But the
rest of the factors have been consistent.

Besek: where you find inconsistencies is when there’s a genuinely
new use and courts split.Sony: district court goes one way, court
of appeals reverses, SCt reverses them.

Jaszi: there’s a lot more consistency in the current pattern
of decisions than he would have necessarily expected for only 20 years.Now we’re seeing a convergence of the most
important 2 circuits, the 2nd and the 9th.One can agree or disagree with the emerging
unified field theory, but it’s remarkably consistent even though it can
sometimes be unclear how it applies.

Marino: as a prosecutor, used to inconsistency.

Rep. Goodlatte: For Novik/Lowery, see lots of remix.If they exploit it themselves, the original
artist whose work has been altered doesn’t benefit.Thoughts on that?

Novik: I do noncommercial transformative work—talk to 16 year
olds who are writing their own Harry Potter stories where they write themselves
in; it’s noncommercial.

Goodlatte: should they need a license?

Novik: a court could decide—part of the decision would be
how transformative it was. Most remix artists understand that and don’t want to
exploit work commercially.

Lowery: often, I find that although these are noncommercial
works, they’re distributed on commercial platforms.Fanfiction.com (he means ff.net) has
advertising.The problem isn’t with
those who create, the problem is these large intermediaries who disseminate the
work who make a profit and encourage their users to make remixes, which may be
fair use or not when they’re noncommercial, but they become commercial when
vacuumed up and monetized.Have some
examples.

Novik: that doesn’t change what the artist is doing.

Lowery: don’t put it on that website.

Goodlatte: Jaszi says fair use is working.Is it working for everyone, or only for
specific groups?

Besek: Fair use is working for some, but not for all users
and not for all rightholders. Recent cases that deal with one party exploiting
lots of works at the same time distorts fair use. End is a good one (indexing
all works) but the question is how you get there—means to the end.By trying to shoehorn it into fair use,
disservice to copyright.

Wimmer: Generally working. We look at fair use both from
offensive and defensive side. Newspapers need fair use to report on others’
work. But commercial appropriation of mass amounts is different. Transformative
trend is concerning, but it’s a short term trend and we think courts will get
it right.

Novik: generally working, but individual artists can be at a
substantial disadvantage to large conglomerates or automated systems.

Lowery: working for music. Photographers have been
abused.Business model has been wrecked.

Jaszi: there are creators struggling in the current market,
but that’s not attributable to fair use.Besek’s example of mass digitization is an excellent example of the
doctrine fulfilling its function—the material is being dramatically repurposed
for nonsuperseding uses; the public interest is enormous; no existing licensing
structures are available to enable those uses.Instead of thinking about mass digitization and its benefits (including
the print disabled) as a problem, I see it as a success story.

Rep. Deutch: We have 100 years of precedent. Troubled by the
idea of just inserting “fair use” into trade deals, without our precedents.
While trade agreements allow flexibilities to adopt fair use style exceptions,
mandating it would just provide a loophole for other countries to ignore IP.Besek says fair use could put us out of
compliance with treaty obligations (interestingly, her testimony cites a
finding that sec. 110 was out of compliance, and we have yet to come into
compliance after nearly 15 years; funny that people purport to care now).

Besek: some similarities, but different cultural factors
give no reason to think it would track our fair use law. We attempt to
accommodate 1A concerns, and other countries don’t.Tradition of more explicit separate
exceptions; wouldn’t necessarily do what we did.

Deutch: their exceptions could fill a volume too.

Besek: sure, and often track what fair use does.

Deutch: concern is it becomes a loophole. Important balance
to be struck in our trade deals, and the words “fair use” don’t do anything.

Wimmer: right.He’s
done legal work in 20 different countries—common law and civil law are
different.Civil law—judges don’t have
the same tradition of working to create precedent, and they really can’t cope
with these types of common law doctrines.

Creative Commons/disclaimer

Text on this blog is licensed under a Creative Commons Attribution 2.5 License. Pictures and works quoted may be subject to other parties' copyrights.
I speak for myself. On this blog, I do not and cannot speak for Georgetown Law, the Organization for Transformative Works and/or AO3.